Grading Obamanomics

Robert Reich was Clinton's Secretary of Labor and is a professor at the University of California at Berkeley. He writes:

As a university professor I'm accustomed to giving grades. So here's my report card on Obamanomics so far:

The 10-year budget gets an A. It's an extraordinary vision of what America can and should become, including universal health insurance and environmental protections against climate change. And the budget takes a little bit more from the rich and gives a little bit more back to the poor and lower middle class, which seems appropriate given that the income gap is wider than it's been since the 1920s. I'd give the budget an A plus except for its far-too-rosy economic projections.

The stimulus package gets a B. Good as far as it goes but doesn't go nearly far enough. $787 billion over two years sounds like a lot of stimulus. But the economy is operating at about a trillion and a half dollars below its capacity this year alone. And considering that the states are cutting services and increasing taxes to the tune of $350 billion over this year and next, the stimulus is even smaller.

The last grade is for the bank bailouts. I give them an F. I'm a big fan of this administration, but I've got to be honest. The bailouts are failing. So far American taxpayers have shoveled out almost $600 billion. Yet the banks are lending less money than they did five months ago. Bank executives are still taking home princely sums, their toxic assets and non-performing loans are growing, and the banks are still cooking their books. And now the Treasury is talking about converting taxpayer dollars into bank equity, which exposes taxpayers to even greater losses.

So that's the report card. An A on the budget, B on the stimulus, and F on the bailout. On the whole (given how I weigh grades) that gives Obamanomics a C-plus. Not bad given the magnitude of the problems Obama inherited. But by the same token, not nearly good enough.

I'll give Obama close to an overall C+ as well. But my breakdown is very different.

The 10-year budget gets an F. It's the polar opposite of the Clinton-Gingrich years, and worse than those of solid Republican control-- there's absolutely no fiscal restraint to be seen. It's a nightmare scenario for anyone in the center and right-of-center.

The stimulus effect is difficult to judge at this early point. Theory-wise it sure runs contrary to the historic triumph of laissez faire-ish principles. But I'm going to be optimistic and give it a B like Reich.  One can hope.

Lastly, Reich's assessment of the bank bailouts doesn't seem to grapple with the tradeoffs and compromises that make the PPIP more palatable than nationalization or bank runs. And he says he's concerned about equity stakes exposing taxpayers to losses, but don't equity stakes actually have more potential for upside compared to mere loans, which could also be losses?

Other lefties like Yglesias and Krugman were arguing that the original bailouts were subsidizing losses and privatized gains. They wanted a nationalization of gains so the taxpayer could benefit from these investments. Well, that's what equity is for. It's called capitalism. Now obviously I'm no expert on this subject, either, but I'll give Obama another optimistic B. It could end up lower as things pan out, but Reich's F strikes me as highly unlikely